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ECB de Guindos said UK election results eliminate uncertainty in the short term

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    ActionForex.com
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    ECB Vice President Luis de Guindos hailed that “the results of the elections in Great Britain are positive because they eliminate uncertainty in the short term”. And, “we know perfectly well that on the 31st January the United Kingdom will leave the union – this is good in terms of uncertainty, but also hails a new period, one which will not be easy.” “It will not be easy because commerce rules will have to be renegotiated.”

    Separately, Governing Council member Francois Villeroy de Galhau said “The economic situation in the euro zone is beginning to stabilise … and as the situation stabilizes so does monetary policy”. He added, “we are applying the measures decided in September and aren’t adding any more… For how long depends on the economic situation and its improvement.” Another Governing Council member Bostjan Vasle said “domestic factors represent the main drive of economic activity while the growth of foreign demand will be weak”.

    SNB’s Jordan identifies minor inflation risk due to weakening franc

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      ActionForex.com
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      SNB Chairman Thomas Jordan highlighted at an event in Seoul today a “small upward risk” to the current inflation forecasts, which could mean a “more accommodative than intended” monetary policy if realized.

      Jordan pointed out that such inflationary pressures are likely tied to declines in Swiss franc. To mitigate this, the central bank might consider engaging in foreign exchange sales to bolster the currency.

      Moreover, Jordan noted that the natural rate of interest—which serves as a crucial benchmark for setting monetary policies—has shown signs of increasing and may continue to rise in the foreseeable future.

      Despite these concerns, Jordan reassured that the current policy settings are expected to remain effective in maintaining price stability, even if the natural rate of interest edges higher.

      Fed Bullard: We have enough fiscal stimulus in terms of aggregate resources

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        ActionForex.com
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        St. Louis Fed President James Bullard said Fed’s policy is “so far so good”. Negative rates are not a good option for the US and he even questioned they aren’t effect where they have been adopted. Fed would instead need to think about the way to play with QE going forward.

        Bullard is also comfortable with the current amount of fiscal stimulus, as “in terms of the aggregate resources it seems like we should have enough” to bolster growth until Q1. He’s not expecting a surge in fatality rate of coronavirus, which the US has brought down to accidental injury level. He expected business can cope with the situation and operate safely yet succeed economically.

        Canada CPI jumps to 4% yoy on gasoline, above expectation of 3.8% yoy

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          ActionForex.com
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          Canada CPI accelerated to 4.0% yoy in August, up from July’s 3.3% yoy, above expectation of 3.8% yoy. The in CPI was largely the result of higher year-over-year prices for gasoline in August (+0.8%) compared with July (-12.9%). Excluding gasoline, CPI was unchanged at 4.1% yoy.

          CPI median rose from 3.7% yoy to 4.1% yoy, above expectation of 3.7% yoy. CPI trimmed rose from 3.6% yoy to 3.9% yoy, above expectation of 3.5% yoy. CPI common was unchanged at 4.8% yoy, matched expectations.

          On a monthly basis, CPI rose 0.4% mom in August, double expectation of 0.2% mom.

          Full Canada CPI release here.

          UK CPI slowed to 9.9% yoy in Aug, core CPI ticked up to 6.3% yoy

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            ActionForex.com
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            UK CPI slowed from 10.1% yoy to 9.9% yoy in August, below expectation of 10.2% yoy. CPI core rose from 6.2% yoy to 6.3% yoy, matched expectations. The largest contributions to the annual rate in August are from housing and household services, transport, and food and non-alcoholic beverages. July’s figure was the highest since 1982 based on indicative model.

            On monthly basis, CPI rose 0.5% mom, slowed from prior 0.6% mom. Food and non-alcoholic beverages made the largest upward contribution to the monthly rates, while falling prices for motor fuels resulted in a large offsetting downward contribution.

            Also released, RPI came in at 0.6% mom, 12.3% yoy, below expectation of 0.7% mom, 12.4% yoy. PPI input was at -1.2% mom, 20.5% yoy, versus expectation of 1.2% mom, 21.0% yoy. PPI output was at -0.1% mom, 116.1% yoy, versus expectation of 1.6% mom, 17.8% yoy. PPI core output was at 0.3% mom, 13.7% yoy, versus expectation of 1.5% yoy.

            Full release here.

            New Zealand PPI input jumped 2.1% qoq, output rose 1.2% qoq, electricity price surged

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              ActionForex.com
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              New Zealand PPI input jumped 2.1% qoq in Q1, versus expectation of 0.0% qoq. PPI output rose 1.2% qoq, above expectation of 0.0% qoq. The largest output industry contributions were from electricity and gas supply, which was up 17.4%. Petroleum and coal product manufacturing rose 12.2%. daily cattle farming rose 5.1%.

              The largest input industry contributions were from electricity and gas supply, which was up 28.7%. Dairy production manufacturing rose 4.7%. Petroleum and coal product manufacturing rose 9.3%.

              “Lower lake levels in the South Island have driven up wholesale prices for electricity generation, while an unexpected fall in production at the Pohokura gas field has seen gas supply prices also increase,” business prices delivery manager Bryan Downes said. “The quarterly price change is the largest since 2018 but is nowhere near the magnitude seen in the 2008 power crisis.”

              Full release here.

              China PMI services dropped to 46.7, PMI composite dropped to 47.2

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                ActionForex.com
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                China Caixin PMI Services dropped sharply from 54.9 to 46.7 in August, well below expectation of 52.6. PMI Composite dropped from 53.1 to 47.2, first contraction since April 2020. Caixin said business activity and new orders both fell amid uptick in COVID-19 cases. Companies reduced their staffing levels slightly. Input costs rose at slower pace, output charges declined.

                Wang Zhe, Senior Economist at Caixin Insight Group said: “The Covid-19 resurgence has posed a severe challenge to the economic normalization that began in the second quarter of 2020. Both manufacturing and services shrank in August, with the latter hit harder than the former…

                “Official economic indicators for July were worse than the market expected, indicating mounting downward pressure on economic growth. Authorities need to take a holistic view and balance the goals of containing Covid-19, stabilizing the job market, and maintaining stability in prices and supply.”

                Full release here.

                Dollar lower on data and diving yields, stocks down but no follow through selling

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                  ActionForex.com
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                  Dollar ignored better than expected ADP employment data. Instead, it responds negatively to ISM manufacturing miss and tumbles broadly in early US session. Additionally, the greenback is also weighed down by dovish comments from Dallas Fed Robert Kaplan, and the free fall in treasury yields.

                  Dollar is the weakest one for today so far, followed by Swiss Franc. Canadian Dollar over took Yen’s place as the strongest as decline in USD/CAD gathers steam.

                  In the stock markets, DOW tumbles sharply to as low as 22668.77 initially on Apple as well as weak manufacturing data. But for now, there is no apparent follow through in selling yet. While we’re expect strong resistance between 23431.98/23713.93 to limit upside to complete the corrective rebound from 21712.53, break of 22267.42 is needed to confirm completion of the rebound first.

                  US 10 year yield is now down -0.074 at 2.587 as recent decline accelerates. We’re expecting strong support from 2.517 fibonacci level but this view is getting vulnerable. Yield curve inversion is getting more serious with 1-year yield at 2.563, 2-year at 2.411, 3-year at 2.384 and 5-year at 2.340. It looks like it’s just a matter of time for 1- to 10-year yield to invert.

                  Fed’s Barkin cautious on rate cuts amid lingering inflation pressures

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                    ActionForex.com
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                    Richmond Fed President Thomas Barkin expressed a cautious stance on the prospect of Fed starting to cut interest rates in the near future, citing ongoing inflation pressures as a primary concern.

                    In an interview with CNBC, Barkin emphasized the need for inflation to normalize before considering adjustments to the interest rate policy. “I’m still hopeful inflation is going to come down and if inflation normalizes then it makes the case for why you want to normalize rates, but to me it starts with inflation,” Barkin stated

                    Barkin highlighted continued wage and inflation pressures, referencing a recent report indicating high inflation levels. While he noted some stabilization in goods inflation, Barkin pointed out that inflation in the services sector remains a challenge.

                    “I still see wage pressures, I still see inflation pressures…we just had a high inflation report yesterday… On the goods side inflation is settling. On the services side, not so much,” he elaborated.

                    Trump to end preferential trade treatment to India and Turkey

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                      ActionForex.com
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                      Trump sent a letter to Congressional leaders notifying his intention to end preferential trade treatment to India. He complained that “I am taking this step because, after intensive engagement between the United States and the Government of India, I have determined that India has not assured the United States that it will provide equitable and reasonable access to the markets of India.”

                      Under Trump’s instruction, the US Trade Representative also issued a statement on its intention to terminate Generalized System of Preferences (GSP) designation of both India and Turkey. The statement noted that “India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.  Turkey’s termination from GSP follows a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the United States market.”

                      And, “by statute, these changes may not take effect until at least 60 days after the notifications to Congress and the governments of India and Turkey, and will be enacted by a Presidential Proclamation.”

                      USTR statement.

                      Japan industrial production rose record 8.0% mom, still way off pre-pandemic level

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                        ActionForex.com
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                        According data from Japan’s Ministry of Economy, Trade and Industry, industrial production grew 8.0% mom in July, well above expectation of 5.0% mom. That’s also the quickest jump on record since 1978. Manufacturers are expect output to grow further by 4.0% mom in August, and further by 1.9% in September. However, METI expects output to remain below pre-pandemic level for some time. Over the year, production was down -16.1% yoy.

                        On the other hand, retail sales dropped -2.8% yoy in July, much worse than expectation of -1.7% yoy. Housing starts dropped -11.4%, better than expectation of -13.7% yoy. Consumer confidence edged down to 29.3, down from 29.5, missed expectation of 29.4.

                        As Prime Minister Shinzo Abe is stepping down, it’s reported that the ruling LDP will vote on September 14 to select a new leader.

                        Trump signed HKHRDA into law, China and Hong Kong government oppose

                          By
                          ActionForex.com
                          -

                          US President Donald Trump finally signed the bipartisan supported Hong Kong Human Rights and Democracy Act overnight. A second bill to ban export of crown-control munitions to Hong Kong was also signed. Trump said, “I signed these bills out of respect for President Xi, China, and the people of Hong Kong. They are being enacted in the hope that Leaders and Representatives of China and Hong Kong will be able to amicably settle their differences leading to long term peace and prosperity for all. ”

                          Republican Senator Marco Rubio, a main driver and sponsor of the bill, said, “In an overwhelming display of bipartisan unity, Congress passed our Hong Kong Human Rights and Democracy Act, and I applaud President Trump for signing this critical legislation into law. I look forward to continuing to work with the administration to implement this law.” Democrat House Speaker Nancy Pelosi said, “If America does not speak out for human rights in China because of commercial interests, we lose all moral authority to speak out elsewhere”.

                          The Chinese Foreign Ministry said the act “severely infringed on Hong Kong affairs, seriously interfered in China’s internal politics, and gravely violated international laws and the basic principles of international relations”. It added, “it is a blatant move of hegemony that the Chinese government and the Chinese people firmly oppose”. The China-appointed Hong Kong Government also said, “the two acts are unreasonable”, and they “will also send an erroneous signal to protesters, which is not conducive to alleviating the situation in Hong Kong”.

                          The HKHRDA aims to back Hongkongers in defend of their autonomy, promised by China in the Sino-British Joint Declaration. Hong Kong’s status will be reviewed by the US State Department, annually, to justify continuation of the favorable trading terms. The law also threatens sanctions for human rights violations by Hong Kong Government officials.

                          Market reactions are so far muted as the main risk remains on outcome of US-China trade deal phase one. Talks are ongoing and no one has eve dropped a hint on when it will be completed.

                          Australia NAB business conditions rose to 25, record high

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                            ActionForex.com
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                            Australia NAB business conditions rose from 17 to 25 in March, hitting a record high. The rise was driven by strong increases in all sub-components. Looking at some details, trading condition rose from 23 to 35. Profitability condition rose from 18 to 26. Employment condition rose from 9 to 16. Forward orders rose from 10 to 17. Business confidence dropped to from 18 to 15, but remains well above its long-run average.

                            NAB said, “This is a very solid survey result. Businesses are telling us activity continues to increase at a very healthy rate as we have move past the rebound phase in activity with the earlier removal of pandemic-related restrictions. Overall, the recovery over the last year has been much more rapid than anyone could have forecast.”

                            Full release here.

                            Japan PMIs: Potential hit to Q2 could be as large as 20% on previous year

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                              ActionForex.com
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                              PMI Manufacturing dropped to 31.7 in May, down from 34.7. PMI Services recovered to 25.3, up from 21.5. PMI Composite recovered to 27.4, up from 25.8.

                              Joe Hayes, Economist at IHS Markit, said latest data provide “yet another shocking insight into the devastating impact of the COVID-19 outbreak”. “Plummeting demand for goods is finally catching up with manufacturing sector”. Taking April and May data together, they’re indicative of GDP falling at an annual rate in excess of 10% and the economy is going to contract for a third straight quarter. Potential hit to Q2 could be as large as 20% on the previous year. Also, “damage to the manufacturing sector could continue to worsen as global trade conditions deteriorate and the global economic recovery is slow”.

                              Full release here.

                              BoJ’s Ueda: Accommodative monetary policy to continue

                                By
                                ActionForex.com
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                                In today’s parliamentary address, BoJ Governor Kazuo Ueda reaffirmed the Bank of Japan’s stance on continuing its accommodative monetary policy, underscoring the short-term interest rate as the “primary policy tool.”

                                A key focus for BoJ, as Ueda noted, is the scrutiny of trend inflation’s progress towards 2% target in judging “appropriate degree of monetary support.”

                                Meanwhile, Ueda clarified that BoJ would not alter its monetary policy solely in response to FX fluctuations. However, he acknowledged that significant FX movements, if they lead to an unexpected increase in import prices and thereby risk elevating trend inflation beyond projections, could necessitate a reassessment of monetary policy.

                                 

                                Gold extends decline on Dollar strength, heading towards 1234 fibonacci level

                                  By
                                  ActionForex.com
                                  -

                                  Gold’s near term down trend resumes today thanks to broad based strength in Dollar. The development also further solidify the case of medium term reversal. That is, rise from 1160.17 has completed at 1346.71, on bearish divergence condition in daily MACD.

                                  Near term outlook will now stay bearish as long as 1280.85 support turned resistance holds. Gold is targeting 61.8% retracement of 1160.17 to 1346.17 at 1234.42 and below.

                                  In the bigger picture, gold was once again rejected below key fibonacci level of 38.2% retracement of 1920.70 to 1046.37 at 1380.36. The developments keeps down trend from 1920.70 intact. It’s too early to declare resumption of the down trend. But reactions to 1160.17 support will be closely watched to assess the chance of breaking through 1046.37 low.

                                  ECB Lagarde: The coronavirus is a double economic shock

                                    By
                                    ActionForex.com
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                                    ECB President Christine Lagarde said in a speech, “the coronavirus is a double economic shock”. Its effect “hit activity extremely hard” but it has also “accelerated structural changes that will transform our lifestyles and our economies.”

                                    “According to some estimates, the pandemic has brought forward the digital transition in Europe by seven years,” she added. 20% of work hours will move “permanently from office to home”, leading to “new patterns of demand and new ways of living”.

                                    She noted that “the pandemic is still weighing heavily on our economies” and “we are not out of the woods yet”. But “with the tremendous progress made on vaccine technology, we can now see the light at the end of the tunnel”.

                                    Still, “I can assure you that the ECB will continue to play its part, as we have done since the first days of the crisis,” she concluded.

                                    Full speech here.

                                    US NFP employment grew 431k, unemployment rate dropped to 3.6%

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                                      ActionForex.com
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                                      US non-farm payroll employment grew 431k in March, lower than expectation of 488k. Overall job growth averaged 562k per month in Q1, the same as the average monthly gain for 2021. Employment was still down by -1.6m, or -1.0%, from its prepandemic level in February 2020.

                                      Unemployment rate dropped from 3.8% to 3.6%, better than expectation of 3.7%. Labor force participation rate rate little changed at 62.4%.

                                      Average hourly earnings rose 0.4% mom, matched expectations.

                                      Full release here.

                                      Germany and China signed pacts to deepen financial sector cooperation

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                                        ActionForex.com
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                                        Germany and China pledged to deepening cooperation in the finance sector and fight trade protectionism during Finance Minister Olaf Scholz’s two-day visit to Beijing. And three pacts are signed, including agreements with the China Banking and Insurance Regulatory Commission and China’s Securities Regulatory Commission.

                                        Ahead of today’s meeting with Chinese Vice Premier Liu He, Scholz said “it is important that, contrary to recent trends that we can observe elsewhere, we are seeing progress in our cooperation”. And, “we have a lot of common interests in financial matters, and then we need to bring different perspectives together. I believe that is the very important task of this financial dialogue.”

                                        Eurozone unemployment dropped to 8.4% in Oct EU unchanged at 7.6%

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                                          ActionForex.com
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                                          Eurozone unemployment rate dropped to 8.4% in October, down from 8.5%, matched expectations. There were 13.825m unemployed in Eurozone, down -86k for the month.

                                          EU unemployment rate was unchanged at 7.6% in October, 16.236m were unemployment, down -91k comparing to September.

                                          Full release here.

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